RTD Gets Less Insurance for More Money

The Southern California Rapid Transit District Wednesday negotiated a one-year contract for only a third of the liability insurance coverage it now has--at an annual cost of $1.72 million--substantially more than the $67,000 it now pays.

The contract was negotiated only hours before a midnight deadline, when the RTD’s old policy expired.

RTD General Manager John A. Dyer said the new arrangement came just in time to avert a possible shutdown in bus service.

“I would really have had no alternative as the chief executive other than to suspend the service, advise the board of directors as to the problem and advise the board of directors that we have to obtain catastrophic insurance coverage,” Dyer said. “The risk is just too great.”

Under its new $10-million-per-accident policy, the RTD agreed to take a new $4-million self-insured deductible for personal injury and property damage claims. Insurance underwriters--Transcontinental Insurance Co. and American Insurance Group--agreed to provide the RTD with $6 million in excess liability coverage.

Under its old policy, the RTD was self-insured for $1.5 million and was covered for another $28.5 million per accident in catastrophic insurance. That policy, written by Integrity Insurance Co. and California Union Insurance Co., expired at midnight Wednesday. Those carriers had not responded to RTD’s request to renew, officials said.

Dyer said the new policy will provide enough coverage for the district to continue operating safely.

And he said, “I’m confident that we can find the additional coverage or most of it in the next few days.”

Despite the skyrocketing cost of its premium, Dyer insisted that there would not be any fare increases or service cuts as a result of the higher insurance costs. He said the RTD had budgeted $500,000 for insurance in its current $480-million budget and the additional $1.2 million needed to pay for the insurance premium can be gained by cutting down on accidents.

Two or three fewer accidents a day among the district’s 2,600 buses would reduce the number of claims against the district and lead to the needed savings, Dyer said.

RTD officials began searching for new insurance carriers in the last few weeks when they learned that insurance carriers had little interest in providing coverage.

RTD officials said the bus system’s accident record was no worse this year than in the past. About 7,000 claims were filed last year. But in the last five years, Dyer said, the RTD has not exceeded its deductible.

RTD officials braced themselves for a whopping increase in the premiums, which insurance companies had blamed on huge court-awarded judgments in liability cases and a drop-off in investment revenue.

Public agencies such as the RTD and large private corporations, or their insurers, also faced large financial burdens under a legal doctrine that had those with so-called “deep pockets” paying for a large share of damages no matter the share of blame.